This supplement is an independent publication from Raconteur Media

27 October 2009

www.sagepay.com

Keep your e-money moving

Great strides have been made to offer the consumer numerous choices in ways to pay

electronically. The regulatory au-thorities, notably the Financial Serv-ices Authority and the Information Commissioners Office, have been instrumental in ‘keeping up’ with the internet revolution.

For the retailer that sells goods or services online the playing field seems less than level, since consumers have the benefits of regulation and legisla-tion on their side, whilst there is much fraudulent activity on the Internet.

The bad news with payment cards is that the card issuers can reject a trans-action for a variety of reasons. Perhaps

worse, transactions - like cheques - can be returned some time after they are processed. If the cost of leasing a card terminal and paying a minimum monthly charge to the transaction processor is factored in - plus a myriad number of extra charges, such as 3 to 5 pence card authorisation fees, 50 to 75 pence card refund fees and commis-sion fees of up to 5 per cent on some lesser-known cards - the process of ac-cepting cards can start to grossly affect a company’s profits.

It’s for this reason that a grow-ing number of smaller businesses are turning to online e-money firms like Paypal and NoChex that process card transactions for online merchants without the need for card terminals

and monthly minimums. Although convenient, these e-money (electronic money) services can work out to be an expensive option and thus it is crucial to draw up a cost analysis.

online professionalsOnline businesses wanting to accept electronic money can opt for an on-line transaction processing account from companies such as Sage Pay and Worldpay, to mention but a few. Both firms are well established; with Worldpay part of the RBS Group’s Streamline operation and Sage Pay the result of a recent merging of brands between Sage, the account-ancy/business software specialist and Protx, the online transaction proces-

sor. Charges for both these primary professional transaction processors vary and are – like so many aspects of card acceptance arrangements – sub-ject to negotiation.

As a general rule of thumb, the transaction processor’s control of verifying the identity of a debit card-holder seems less rigorous than with a credit cardholder.

Anecdotal evidence suggests that this is because with a credit card cardhold-ers are effectively spending the card is-suers’ money, whilst with a debit card, the bank or building society can re-move the money straight out of a cus-tomer’s bank account. For an online retailer, this can mean that a debit card transaction – though cheaper to proc-

ess where a professional transaction processor is involved – has a higher chance of a chargeback occurring.

Chargebacks are incurred when-ever the cardholder disputes the transaction – for any reason – and the card issuer starts an investigation. The process can take some time but it is normal for the retailer to see the value of a disputed transaction (the chargeback) taken from their avail-able card transaction balance for a period of between 30 and 60 days.

After this period, when a dispute is resolved, the funds are either placed back into the retailers account or the chargeback is confirmed.

Welcome to the world of electronic moneyE-money is the lifeblood of mail order businesses, especially those firms that operate on the Internet. But what are the perils and pitfalls of accepting e-money as a form of payment? Steve Gold discovers that e-money is lot more than just plastic cards...

continued on page two

Painless transactions Completing transactions online is no longer a sticking point. We take a look at the major providers. page 4

A roadmap to e-invoicing Why not send your invoices electronically? It saves you time, money, effort and an awful lot of paper. page 8

Business compliance Since fraud is a major obstacle, companies must factor security compliance into their proposition. pages 14-15

e-MoneY 2010

2 E-MONEY 2010

Retailers with a store frontage have the advantage of having a customer signature or PIN verification to wave at their transaction processor. Online merchants have no such protection. If the cardholder wants to cause prob-lems for the retailer they can, and quite frequently it seems that they do.

Curiously, most transaction proc-essors impose a transaction fee for processing chargebacks and refunds. This means that, even if the cardholder dispute is found to be invalid and the funds are released back to the retailer, the fees are still imposed.

This, unfortunately, is the price of doing business. For online retail-ers, there is little option but to grit their electronic teeth and suffer the death (or so it seems) of a thousand micro charges.

low-value e-MoneY transactionsVisa and Mastercard are busy trialling a low-value (typically sub ten pounds) initiative – respectively branded Pay-Wave and PayPass – where a user has a smart card with an embedded radio wave-enabled chipset. A good exam-ple of this is the Transport for London Oyster card. Despite some early prom-ise, the aforementioned cards have never been engineered for use online and away from the real world.

According to Steve Howes who is chief executive of Gridsure, a UK-based company that has developed a pictorial alternative to the PIN system that most of us use with our payment cards here in the UK, the current situa-tion with e-money is unlikely to change for the foreseeable future. Gridsure is a personal identification system that extends the standard ‘shared-secret’

authentication model of 3DSecure (Verified by Visa and Mastercard Se-curecode) to allow a user to create a one-time pictorial PIN that authenti-cates the cardholder. Howes, an Inter-

net and e-money veteran whose ex-perience dates back to the 1980s, says that whilst banks always appear to be trendy they rarely innovate unless it suits them. “This means that innova-tive e-money services like Mondex and Paypal invariably get swallowed up by banks and big business and either qui-etly buried (like Mondex) or repack-aged (like Paypal),” he says.

“Visa and Mastercard have an inter-esting approach in this regard. They say ‘we are a membership organisa-tion’ and, as a result, everything gets done by committee and takes an age to be agreed upon and eventually tri-alled,” he added.

According to Howes, this effectively stifles innovation in the e-money business. One may draw the conclu-sion therefore that despite the media hype over alternative payment tech-nologies, most businesses will be ac-cepting card payments in their current form for some time to come.

Howes says that Chip and PIN is a classic case of this ‘management by com-mittee’ approach. The Chip and PIN technology, he explains, was originally developed and used in France in the 1980s and, by the time it rolled out in the UK, the technology was actually 20 years old. “Will e-money take off? It’s going to take a lot of time. UK banks are rather like Gringotts Bank in the Harry Potter novels. Very archaic and traditional.”

Fortunately for businesses, UK banks are not run by goblins, as is the case in the world of Harry Potter, but for most online businesses – as well as traditional retailers expand-ing online – the choices are many and varied. Conversely, businesses of all sizes can seek out the best trans-action processor for them as well as going some way to keeping fraud and potential chargebacks at bay.

e-money 2010

The information contained in this publication has been obtained from sources the proprietors believe to be correct. However, no legal liability can be accepted for any errors. No part of this publication may be reproduced without the prior consent of the Publisher. © RACONTEUR MEDIA

publisher: Jamie Simon editor: Tobias Kelly contributors: Steve Gold, Andrew Gellatly, Barnaby Page, Ron Condon, Rod Newing, Thaer Sabri, Bob RussoDesign: Hervé Boinay, Steve Burgess

For more information about Raconteur Media publications in The Times and The Sunday Times, please contact Freddie Ossberg T: 020 7033 2100 E: info@raconteurmedia.co.uk W: www.raconteurmedia.co.uk

continued from page one

The elecTronic money aSSociaTion

Just to make life interesting, there are a lot more e-money options available for online retailers. These include e-gold

and Neteller, for instance and many are mainly based in the US.

These services are often priced very appealingly but the downside is that your transactions – and those of your customers – are normally charged in US dollars, meaning both sides take a modest ‘hit’ on the exchange rate commission front.

Added to this, anecdotal evidence suggests it’s a lot more difficult for retailers to prove their side of the case

where a chargeback is involved. It’s also worth noting that US transac-tion processors are normally outside of the reach of the Financial Serv-ices Authority meaning that you may need to hire a US lawyer if you hit any serious problems.

There are many reasons for a chargeback to be issued ranging from ‘buyer’s remorse’ – where the buyer has second thoughts on their purchase – right through to real criminal card fraud. With each chargeback the card issuer usually selects and submits a numeric ‘reason code’ to the transaction processor,

which helps the transaction processor – and the retailer – understand why the chargeback has occurred.

Reason codes vary by card issuer and network, but fall in to four general categories:n � Technical – Expired authorisation,

insufficient funds, or bank processing error

n � Clerical – Duplicate billing, incorrect amount billed, or where a refund was never issued

n � Quality – Customer claims to have never received the goods or service promised at the time of purchase

n �Fraud – Customer claims they did not authorise the purchase, or have been the victim of identity theftOne of the most common reasons

for a chargeback is a suspected or actual fraudulent transaction. In this

situation, a card is used without the consent or proper authorisation of the cardholder. In many cases, a retailer is responsible for charges fraudulently imposed on a customer. Mostly, however, fraudulent card transactions originate with criminals who gain access to secure payment card data and set up schemes to exploit that data.

Chargebacks can also result from a customer dispute over a return. This type of chargeback is usually described as credit not processed. A customer

may have (or claim to have) taken back merchandise to a merchant in return for a credit, but the credit was never posted to the account. In this example, the retailer is responsible for issuing a credit to its customer, and would be charged back.

Other types of chargebacks relate to technical problems between the merchant and the issuing bank, whereby a customer was charged twice for a single transaction (duplicate processing) for instance.

Against this backdrop, a number of players in the financial industry have tried to launch e-money initiatives but to date they have all either failed or been snapped up by big business.

15 years ago, the banking industry initiated projects to replace physi-cal cash with an electronic equivalent or e-cash. With some initiatives based around payment cards and some using electronic networks, most met with limited success; consumers did not see a compelling reason to move away from cash.

The advent of the Internet brought with it opportunities for electronic payments that exploited limitations of alternative products. The introduc-tion of an instant means of payment by PayPal, Moneybookers, Click and Buy and others provided a real consumer advantage. Today, the segment has more than 250m users worldwide, accounting for some 10% of global consumer e-commerce.The story of prepaid cards provides a number of insights into changes in approach that have led to recent success. Prepaid cards have become mainstream in the USA, and now are on the threshold of growth in Europe. They have succeeded by focusing on clear and well defined consumer propositions; providing electronic alternatives to gift cards, travellers cheques or store cards.Gradually, more general purpose cards are beginning to find their way into the market, meeting the needs of the unbanked, those preferring not to use their credit card online and those seeking a budgeting tool for better spending control.

Furthermore, these have been largely marketed as retail consumer products rather than traditional financial services products;. adver-tised and sold in supermarkets and convenience stores as well as bank branches, their branding more in common with consumer goods than with Traditional financial

products. Increasingly alternative outlets are also being used, such as money transfer agents, travel agents, and online financial services sites, targeting specific consumer segments.

The outlook for both online and card based products is good, and the maturing of mobile and (contactless) technologies promises a rich and diverse payments environment for the future.

“Even if the cardholder dispute is found to be invalid and the funds are released back to the retailer, the fees are still imposed”

is e-money ever going to arrive?

Pin verification can serve as protection for retailers in chargeback disputes

There are more e-money alternatives for retailers than you would think but it may be more difficult to prove their side of the case where a chargeback is involved

Distributed in

Published in association with:

Electronic Money Association

E-MONEY 2010 3

With 60,000 regular travel-lers, each making more than 12 expenses claims per year, it is essential

that BT has an efficient process to han-dle travel expense claims. BT’s growing international activities also mean that any management system needs world-wide coverage in order to consolidate and centrally process global data.

Gaynor Martin, global corporate card manager at BT since 2003, explained: “In 2008, it was decided to overhaul BT’s corporate card programme for a more efficient, streamlined process. We looked for a self-issuing card provider, because our UK card base is simply too big to work through a third party. We also felt that a lodged card account was a key for moving the programme forward, to centrally settle pre-trip travel costs like air fares, train fares and car hire. However, full central settle-ment would not be suitable for BT; the Company deals with a range of different businesses, and in some sections, like BT Retail, for example, the sales force and field managers need cards at hand for on-the-road travel expenses, particu-larly petrol costs.”

tenDering processAfter a lengthy and detailed tendering process, BT eventually chose AirPlus International for its corporate travel payment solutions, starting implemen-tation in January 2009 and achieving full operation by April with both lodged and individual cards. By August, 20,000 cards had already been issued in the UK, and other regular travellers continue to be encouraged to apply during 2009.

BT is aiming to increase the number of expenses processed through the lodged account, ultimately reducing credit lim-its on the individual cards, saving costs and reducing company risk. AirPlus works closely with BT’s travel agent for scheduled flight bookings, and will soon start incorporating budget airline and train bookings into the lodged account. With central settling, frequent travel-lers do not need to receive thousands of pounds from BT and be left with the responsibility for paying that to the card provider. BT has already seen a reduc-tion in non-payments since starting the new programme. Previously, somebody could buy a flight one month using the individual corporate card and go on the trip the next month when the bill came in, accruing interest unnecessarily; with a lodged account, it is automatically paid so there is no delay.

In the UK, only a very small percent-age of people pay their cards by direct debit, so AirPlus introduced a wider range of ways in which people can pay, including by phone and via internet banking; in June, AirPlus added on-line payment, through its own portal. The range of payment options has also helped to reduce late payments.

global prograMMeBy switching to AirPlus, BT has been able to implement a global programme, and Gaynor is able to see worldwide data through the AirPlus Information Manager online reporting tool. From October 2008, when the UK operations were still in the planning stages, AirPlus solutions were already being rolled out in 20 other countries, through partner issuers for the individual cards. Gaynor elaborated: “One of the ad-vantages of being with AirPlus is that, although the cards are issued by a part-ner issuer in different countries, there is an AirPlus presence in every one of those countries, ensuring that a direct line of contact is maintained between BT and AirPlus.”

As BT continues to develop its corpo-rate card programme, AirPlus has been adaptable to BT’s unique requirements. “AirPlus has been extremely flexible in setting up exactly what BT needs, and came up with some innovative ideas to tackle certain challenges. Its representa-tives have also been very receptive and responsive to any requests that we have made, even as far as how the statements would look. AirPlus has been excellent in helping us to optimise our expenses handling processes,” Gaynor concluded.

PROMOTIONAL FEATURE

airPlus transforms corporate card programme at BT

When BT needed a global card provider to streamline its corporate card operations, it looked to AirPlus International for both its lodged and corporate card solutions STreamlined ProceSSeS

Of particular value to Gaynor’s team is being able to have the centrally settled account visible to line managers.

“Claiming all expenses through the Oracle system, part of which is centrally settled and another part paid to the employee, was a brand new scheme that AirPlus did a lot to help us develop, proactively communicating with the Oracle consultants.

Oracle automatically allocates all flights to the budgets, and every individual can see their flight costs, as well as the costs on their individual cards. The link with Oracle makes it so much easier to handle the information.”

exPenSeS ProceSSed overniGhT

Gaynor said: “Many of our previous systems have been replicated with AirPlus, and the programme has improved significantly. With the AirPlus Company Account lodged card, we now have centrally settled scheduled air fares, which has been a huge step forward.

With the AirPlus Corporate Card, expenses incurred through individual business cards are processed over-night, to pre-populate the account for when the employees claim their expenses. Each of the pre-populated credit card transactions is justified for tax purposes, and any cash or mileage are added. The new system has been a big time-saver for us.”

“After a lengthy and detailed tendering process, BT eventually chose AirPlus International for its corporate travel payment solutions”

4 E-MONEY 2010

E-business works because it shrinks the distance and time that historically so often separated willing

buyers – be they consumers or businesses – from sellers offering just the right goods and services. But while the Internet quickly made contact between sellers and customers much easier to establish, completing the transaction with a payment was often a sticking point.

Accepting an order online is one thing; sending money in a way that’s secure, reliable and cost-effective for both parties is a good deal more complex. While the big banks and credit-card companies have now accepted the reality of online business, with divisions like The Royal Bank of Scotland Group’s WorldPay supporting online business as eagerly as real-world transactions, their early laggardliness allowed the emergence of a new class of financial facilitator, the payment service provider.

In essence, these operations complete the link between the two participants in an online transaction by taking payment from the buyer and passing it on to the seller, in a way that’s as hassle-free and secure as possible for both.

For the seller, they remove the headache of developing and managing in-house systems that would have to handle multiple payment methods and foreign currencies; for the buyer, they make it easy to complete a transaction

quickly and confidently, even if their existence is minimised beneath the seller’s own branding. They’re not dissimilar to the merchant service providers that process businesses’ credit-card transactions, but frequently offer a wider range of payment options and – crucially – have a resolutely international outlook.

“Two of the greatest challenges faced in making payments overseas are the complexity of payment formats and the ability to track the status of transactions from initiation to beneficiary. Payment service providers need to offer solutions that address both issues,” says Colin Kerr, industry manager for payments and core banking at Microsoft Worldwide Financial Services.

Probably the best known to consumers is PayPal, an early entrant into Internet payments – it was founded during the first flush of Webmania in 1998. PayPal has been relentlessly pushed by eBay, which acquired the service in 2002, as the payment method of choice for the millions of online auctions it hosts, and that in turn has given it a household-name familiarity unrivalled by any other payment service provider.

one-off creDitPayPal continues to develop – most recently, for example, with the introduction of Pay Later, a service through which consumers can obtain one-off credit to fund their online purchases. And over the years it has seen off plenty of competitors, including Billpoint – its predecessor in the eBay stable – as well as Western Union-founded BidPay and the PayDirect service operated for Yahoo! by HSBC.

However, despite its high profile, PayPal is far from the only choice for businesses looking to complete transactions online.

Among the most significant alternatives, because of its hugely powerful owner, is Google Checkout, which has been available in the UK for about two-and-a-half years. Unlike PayPal, which offers some bank-like

functionality such as storing a cash balance in the consumer’s account, Google Checkout is focused on single transactions. Users save their card details and personal information in their Google account, then only have to enter a password to pay for their purchases with Checkout.

siMple ...or coMplex?From the seller’s point of view, Checkout, like many other payment services, can be simple or complex to implement, depending largely on the extent to which you want the payment process to be integrated with your other systems and your own branding. At the most basic level, appropriate to the smallest online operations, ready-to-use HTML code supplied by Google can be pasted into a firm’s own Web pages; more sophisticated e-businesses may find that their shopping-cart technology already incorporates support for Checkout (about a dozen do), or develop a bespoke interface to make other shopping carts work with the payment system.

Unsurprisingly, Google has ambitions for Checkout that go beyond merely providing an enabling technology. Already firmly in control of the first part of many online shopping expeditions – the user’s search, and the merchant’s advertising – it now wants to be present at the completion of the transaction too, and hopes that it can deploy its existing large base of registered users and its advertising platform to enhance the performance of its payment system.

The company claims that Checkout users are ten per cent more likely to click on AdWords – the ads displayed on its search-engine results pages –

when they display the Checkout logo, and also that the system’s simplicity means customers already signed up to Checkout are 40 per cent more likely to be converted to a sale than non-Checkout users.

PayPal and Google may be the best-known brands, however, many less high-profile payment service providers find their strengths in more specialist services. Envoy Services, for example, emphasises its international creden-tials by supporting 15 local languages as well as 20 local payment options, including POLi (Australia & New Zea-land), Abaqoos (Hungary) and Telen-gresso (Spain). By contrast, Google Checkout accepts only a handful of internationally well known cards.

Envoy Systems allows companies to receive money by local wire transfer, without having their own bank ac-count in those territories and transfer funds to 192 countries, through their 150 local bank accounts, supporting over 22 currencies. This offering is enabled by a range of real-time bank-transfer services, which last year saw 25 million cross border payments exe-cuted, totalling in excess of $1 billion.

Others go beyond payment services to support the rest of the transaction. Kagi, for instance, can provide technology to manage the downloading of paid-for digital content or the online registra-tion of software purchases, and for mer-chants selling physical goods, it offers warehousing and fulfilment services.

Similarly, Dragonfish specialises in providing payment services to the online gaming sector, although it is now expanding into retail too, accord-ing to marketing director Gavin Bisdee. This sector-specific focus allows it to

offer additional services such as a team of experts on preventing gaming fraud, and again a global mindset is on dis-play – the company provides users with live chat support in 22 languages.

And the list goes on: Wirecard, Mon-eybookers, 2Checkout, Digital River’s CCNow, Gogopay, Russia’s Webmoney, PayPoint – perhaps more familiar from its logo in the window of your local newsagent, where the service also allows people to pay utility and mobile-phone bills – and ClickandBuy, with its envi-able list of blue-chip customers includ-ing Electronic Arts, iTunes and Playboy. (Inevitably, the Internet being what it is, there is also an extreme libertarian end of the market, with nascent projects like eCache and Ripple attempting to create digital money and transaction systems untainted by big business.)

paYMents pieAll these and others are competing for a slice of the payments pie, which can only grow as e-business itself grows – earlier this year, payment service provider SagePay was reporting year-on-year growth in transaction volumes of more than 50 per cent every month, and nearly 70 per cent in some.

Many will succeed, and some won’t. The big players – the banks, PayPal, Google and a handful of others – will not go away, but there is scope for niche providers to flourish too when they add value to the buyer-seller re-lationship. Large or small, global or local, selling boxes or selling bytes, each business has distinct require-ments when it comes to outsourcing e-payments – and a provider that meets those needs should soon make its presence felt on the bottom line.

Attracting customers online is the easy bit – taking their money has always been harder. But the payment service provider takes the pain out of transactions, writes Barnaby Page

Putting money in your pocket

“Accepting an order online is one thing; sending money in a way that’s secure, reliable and cost-effective for both parties is a good deal more complex”

E-MONEY 2010 5

Think global, pay local Envoy Services has developed a network of 150 local bank accounts and payment services worldwide. Businesses that are expanding their operations globally need to realise that a one-size fits all business strategy won’t cut it in a competitive environment

PROMOTIONAL FEATURE

The Internet has been break-ing down barriers between different geographic markets for some time. However, lo-

cal customs, traditions and general approaches to business still vary from country to country, and one of the most important of these is the way in which customers prefer to pay for goods and services over the internet.

Businesses that are expanding their operations globally need to realise that a one-size fits all business strategy will not work in a competitive environment. Consumers and businesses alike will choose to engage with the organisa-tions whom they perceive to have the best understanding of them and how they want to operate.

Consider this: a UK company which is successfully operating in the UK by solely accepting payment by cards will, if it takes the same ap-proach in Germany, potentially miss out on sales to over 70 per cent of domestic consumers who will not or cannot use payment cards. Likewise, if the company cannot accommodate the iDEAL payment network in the Nether-lands or Przelewy 24 in Poland, they risk missing out on transactions from up to 80 per cent and 95 per cent of the popu-lation.Without adopting the preferred payment types within each country, organisations risk missing out on huge proportions of business. There is no ex-cuse. Thanks to organisations such as Envoy Services - a UK based payment technology and services provider - it is now easier for businesses to trade in the region of their choice, offering popular local payment services, without having to create a complex, costly infrastructure within each country to do so.

tHe rise of real-tiMe paYMentsThe key to developing a global, but lo-calised, strategy revolves around three key tenets. Offering tailored products that meet the needs within each spe-cific country, conducting business in the right language for the region, and offering payment services that cus-tomers know, use and trust.

This last point relating to payment services may seem obvious, but too many businesses decide how they will accept payment for goods and services as an afterthought. Instead, this should be one of the first issues a business should consider. After all, if people cannot make payments using their preferred method, then there is a high risk that they will look else-where and the transaction will not happen in the first place.

Technological developments have meant that there are many different op-tions when it comes to paying for goods and services. For instance, there is no

doubt that pay-ment cards and online banking have transformed how money transactions can be made. Gone are the days of having to carry vast sums of cash around or relying on the postal service to deliver a cheque to the right person at the right time.

However, just as payment cards sig-nalled the death knell for established pay-ment mechanisms such as the humble chequebook, we are entering a new era of payment technology, which offers a host of benefits for businesses and consumers alike – real-time payments.

Real-time bank transfer services are specifically designed to complement domestic card services to maximise ac-cess to domestic customers –particularly those who prefer not to use cards online. In most cases, these services offer instant secure online bank transfers between business and business, or business and customer. One such real-time payment provider is Envoy Services whose network of bank accounts and payment services is used to collect and deliver money eco-nomically, quickly and securely on behalf of customers and online retailers world-wide. Envoy offers merchants single point access to this ever expanding network of local payment services.

local paYMentsEnvoy does this by operating local bank accounts ‘in country’ which are directly integrated with banks’ proprietary soft-ware. This means that organisations can make and receive local payments through the Envoy interface at a fraction of the cost and time of using their own bank’s international payment service which is often expensive and slow.

Envoy clients, who include Datacash plc, one of the UK’s largest payment processors, and Viagogo, the ticketing exchange, typically save between £10- £15 per cross-border transaction.

Despite the clear benefits of real-time payments, it is not yet the method of choice in the UK where payment cards still account for the majority of the market. Elsewhere in Europe, it is a very different story. A recent For-rester report found that payment card adoption in Germany is typically low, while traditional methods such as bank transfers, bank specific payment instru-

ments such as Giropay, Sofor-

tuberweisung, ELV, payment on invoice and

cash on delivery are popular. In the Netherlands, the domi-

nant payment method iDEAL has seen real-time payments rocket since its launch in 2005, with 28 million transfers processed in 2008. In just four years, iDEAL has become re-sponsible for between 60-80 per cent of all online commerce in that mar-ket, depending on the information source, demonstrating the strong demand from Dutch consumers for such a service.

iDEAL offers consumers a more secure means of paying as there is

no need to enter payment details for every online transaction; payments are quicker as it eliminates the need to register on websites and, unlike credit or debit cards, there are no surcharge fees for the consumer.

For merchants, iDEAL also has a number of advantages: acceptance fees are considerably lower than those as-sociated with credit cards, they receive immediate payment confirmation and they can leverage lower acceptance fees to offer discounts to consumers.

Another example is Przelewy 24, a bank supported service in Poland, which is independently owned by DialCom24. Established in 2003, Przelewy 24 is now supported by approximately 7000 merchants and promotes a staggering 95 per cent banking coverage in Poland.

Not only do the experiences of countries such as Germany, Po-land and the Netherlands demon-strate that real-time payments are a proven and successful real-world possibility, but they also illustrate the contrast in payment attitudes

within the UK: one payment solution does not fit all.

easier for businesses For an individual retailer or service pro-vider, just to be able to offer each of these real- time payment options, even without trying to replicate Envoy’s large network of international bank accounts, would be both extremely costly and ad-ministratively hugely complex.

Envoy has enabled over 300 me-dium to large merchants through a single integration to access a variety of payment methods, and make both significant savings in time and trans-action costs. Last financial year, Envoy processed over 2.5 million cross-bor-der transactions, in 192 countries, rep-resenting a total transaction value in excess of $1 billion. Significant growth is forecasted this financial year.

In summary, it’s the informed com-panies who use these technological advances to their advantage who will be in the best position to reap the benefits of being perceived as a ‘local’ supplier –regardless of where they are located in the world.

www.envoyservices.com

6 E-MONEY 2010

ASOS.com was born on the internet in June 2000, shortly after the internet bubble burst,

when the business landscape was covered in dead and dying web sites. “No guts no glory!” That is the way Nick Robertson, its chief executive and co-founder, philosophically describes the timing.

“The classic internet business model at the time was to raise lots

of money, lose it and go under,” he says. “We were propped up by our other business and only raised £2.8 million from family and friends, so we didn’t have anything to go under with. We just paddled away furiously until the revenue and cost lines crossed in 2003.”

ASOS plc started as a marketing business that did product placement with celebrities. The name was derived from ‘As Seen On Screen’, and the original web site told people what brands celebrities were wearing in programmes and films. Robertson’s vision was to increase revenue by selling the product as well.

Admitted to alternative investment market in October 2001, ASOS is the United Kingdom’s largest independent online fashion and beauty retailer.

Aimed primarily at 16-34 year olds, it offers 25,000 branded and own label product lines over 1,500 new ones are introduced each week. It attracts over 5.2 million unique visitors a month.

With a background in marketing and limited funds, ASOS was able to be very frugal and sensible in the way it attracted its first customers, relying on ‘free’ marketing, like online search and press campaigns. Every day sales were bigger than the previous day, every week bigger than the previous week and every month bigger than the previous month. The trend improved quickly as more fashion products were added to the site.

“Fashion is all about newness, discovery and what is different,” says Robertson, “and the internet enables that in spades. There are no

boundaries and no physical walls, which lets you carry product ranges that are vast relative to a high street store. In a physical world it is all about return per square foot. The biggest high street store has 200 dresses on its web site, we have nearly 3,000. If we are out of stock on one item customers will select another.”

By definition, fashion is notoriously volatile and big name brand perform-ance can quickly go from phenom-enal to catastrophic. However, ASOS is hedged by spreading its risk across 800 brands, as well as its own label.

The United Kingdom clothes market is worth about £45 billion annually. Between five and six per cent is currently over the internet and Robertson expects this to rise to 10-15 per cent over the next three or four years. With reasonably healthy margins in fashion and without the overheads of shops and staff it can be quite profitable. This is bringing in world-class retailers like Tesco and John Lewis.

“We are at the sharp end of fashion, as opposed to clothing,” says Robertson. “It will help to grow the online market, which is good. The tide is definitely in our favour.”

Increasing the amount customers spend on the web, rather than on the high street, involves removing barriers. Instead of trying on in a shop, customers can get free delivery and return.

ASOS can match the instant delivery of a shop with same day delivery for just £9.95 extra. “It becomes so convenient that people won’t get in the car,” says Robertson. His second biggest peak in the day is lunchtime, but the 9.00pm peak is twice that size, when the shops are shut.

He points out that a web platform provides an infrastructure that can service global distribution.

Before investing in any local marketing or language facilities, the site is shipping from the United Kingdom to 114 different countries around the world, with the biggest being Denmark, France, Germany, Ireland, Sweden and United States. International sales already account for 25 per cent of sales are growing at 110 per cent a year.

Robertson sees the big advantages of the internet over the high street as being more inventory, lower overhead and global selling.

He is exploiting these benefits through an organic ‘build and grow’ strategy. Whilst mobile shopping is not material at the moment, he sees it as the next big opportunity.

“Retailers that succeed are those that listen to their customers, give them what they want and execute with excellence,” he concludes. “We have set out our stall to do that, so we stand a good chance of winning the online fashion race.”

no guts, no glory!

“Retailers that succeed are those that listen to their customers, give them what they want and execute with excellence”

nick robertson predicts big growth in the online fashion market

E-commerce success comes from a sound business model, the founder of ASOS.com tells rod newing

E-MONEY 2010 7

Fraud always goes to the weakest point. The payments industry introduced chip and PIN in the ‘card present’

physical world, which drove fraud to the ‘card not present’ world of internet, mail and telephone order-ing. Verified by Visa and MasterCard SecureCode, using their agreed 3-D Secure standard, were introduced to authenticate internet purchasers. Financial Fraud Action UK, the pay-ments industry voice on fraud, has just reported an 18 per cent fall in ‘card not present’ fraud, but an in-crease of 55 per cent in online bank-ing fraud, as criminals move on to the next weak point.

Although a fall in fraud might seem positive all round, web merchants carefully monitor conversion rates from entering check out to making the final payment. Some have been naturally disturbed by perceived lost sales, fearing that additional security is putting buyers off.

“3-D Secure lacked the huge media campaign of chip and PIN to educate consumers,” says Simon Black, managing director of Sage Pay, a payment services provider. “It has also lacked strict enforcement. 3-D Secure needs a password, which is an extra step some users don’t want to take, but is necessary to fight fraud.”

Jennifer Perry, founder of E-Victims, which provides support to victims of electronic crime, says that the banks and retailers protect the trustworthiness of their brand, so don’t want to raise security issues themselves. “They put authentication processes in place to protect themselves as much as to protect the consumer,” she says. “However, consumers do not understand why they are being asked to participate in yet another layer of security and are annoyed.”

She explains that when criminals get hold of your e-mail address they will try to hack your password. If they succeed, they will try the same password on your e-Bay account, then your PayPal account, where they can see your bank and credit card details. “Once you tell consumers this is how the criminal works,” she says, “they suddenly understand why they need to protect themselves.”

According to Financial Fraud Action UK, 31.6 million people use the internet for shopping accounting for 7 per cent of all card payments. However, fraud still only represents a tenth of a penny for every pound

spent. It attributes the reduction in internet fraud to both growth in the use of the new authentication process and the increasing use of sophisticated fraud screening detection tools by retailers and banks.

In Europe 450 banks are employing Verified by Visa and have enrolled 50 million cardholders, mostly in the United Kingdom. Over 50 per cent of

all Visa card e-commerce transactions are now authenticated by the Verified by Visa service.

“We would like it to be a lot higher, but draconian enforcement rules are not in anybody’s best interests,” says Kevin Smith, senior vice president for fraud management at Visa Europe. “We deliberately set out to create the right economic framework, so that individual banks and merchants would deploy at their own speed, hopefully as quickly as possible.”

Visa is working with UK banks, payment service providers and

merchants to replace the current pop-up verification screen with a simpler one that appears to be part of the payment process. It is also piloting CodeSure in six different countries.

This is a standard Visa chip card with a 12 digit keypad and eight digit display screen on the back. When users enter their PIN on the card it displays a random one-time number, which is entered into the Verified by Visa payment process on the computer or given to a merchant over the telephone. Visa expects rapid deployment early in 2010.

“We are all drowning with different static passwords and passcodes for different web sites, applications and payments,” says Smith. “There is a really strong need now to move to dynamic passwords and passcodes, so consumers don’t have to remember them all. Visa CodeSure will not just bring the added security of chip and PIN to online payments and internet banking, but will make it so much more convenient and intuitive for consumers, so it becomes their preferred way of paying.”

The latest Unisys Security Index found that over 60 per cent of consumers are still apprehensive about shopping and banking online. The most practical advice comes from security expert Robert Schifreen: “The best way to ensure that customers don’t abandon the purchase is to ensure that your prices are the cheapest. Then customers know that giving up and ordering from another site will cost them money.”

risk vs opportunity: cost of fraudEducating consumers is essential for successful e-commerce security, says rod newing

Legal departments have unique needs for reviewing and processing law firm invoices and DataCert AIMS provides legal-specific e-billing to meet those needs

“Consumers do not understand why they are being asked to participate in yet another layer of security”

visa codeSure aims to be the consumer’s preferred payment method

PROMOTIONAL FEATURE

Barclays Bank is one of a growing number of organisations in the UK that are taking the lead on implementing electronic billing

specifically for their legal team. The British bank, which employs over

150,000 people worldwide, has imple-mented DataCert AIMS to track its legal spend more closely and automatically validate fees and expenses.

As well as allowing Barclays to track more closely where invoices are in the review process, they are keen to work in partnership with their law firms to understand in more detail the types of work that have been carried out and to improve the management information that is made available.

To achieve these goals, Barclays understood that a legal-specific e-billing system was needed. While horizontal billing systems can satisfy many of the general billing requirements of an organisation, they are insufficient for the more complex billing needs of the legal function for which the invoices are very content-rich, require many validations and complex and variable review/approval workflow, and contain a great deal of line item detail – each relevant and critical.

Barclays understands first-hand the benefits of using DataCert’s legal-specific e-billing system to capture line item detail and ensure compliance with its established guidelines. “Traditional billing software just did not give us enough visibility into the details of each transaction,” said Mark Harding, general counsel at Barclays. “With

AIMS, each invoice goes through an advanced automated validation process. We can now be sure each invoice is compliant with our Outside Counsel Guidelines.”

The data captured through AIMS now gives Barclays an unprecedented view into the details of its legal spend, including which matter, with which law firm, at what cost, and most importantly, for what outcome.

The Barclays experience is typical of the increasing interest DataCert sees in its AIMS solution. “All of the legal departments we speak to in the UK and Europe in general, whatever their size, realise that they have to improve the way they currently handle, receive, review, track, and report on their legal spend,” said Jerome Raguin, DataCert’s Territory manager for the UK & Ireland.

Working with DataCert on Barclays’ legal e-billing initiative has been critical to its success as DataCert is the only vendor in its market that can truly support the unique and complex e-billing requirements defined in the European Union VAT Directive. DataCert provides a comprehensive solution that helps its customers achieve compliance with all aspects of the EU VAT regulations, including an e-invoice’s content, transmission, and storage.

In addition, DataCert has an established team of full-time staff in key European markets, delivering local implementation, dedicated support, and relationship management services to its customers and their outside counsel firms.

The business imperative for legal-specific e-billing software

8 E-MONEY 2010

One connection to all your trading partners

Financial Value Chaintieto.com

Imagine you are a small company cleaning windows for a large com-pany. Each month you print out an invoice, send it to their accounts

department, and then hope you’ll be paid within 30 days.

If payment fails to arrive, then you have to get on the phone, locate the right person to deal with, ask them to locate the invoice and let you know what is happening. If the invoice has been lost or misplaced, you may end up having to send a replacement with more delays and uncertainty.

Apart from the sheer hassle of having to chase payment, that kind of delay can make the difference between survival and failure for many small businesses, especially with credit from the banks being so tight.

Yet it is estimated that around 30 billion – yes, 30 billion – paper invoices are generated across Europe every year, each of them making their own slow journey through the mail service, before navigating an often uncertain path from the company mailroom to the accounts payable department.

How much more efficient would it be to send all those invoices electronically,

directly into the buyers’ own accounting systems? It would save time, money, effort and an awful lot of paper. The chances of suppliers being paid on time would greatly improve too!

The European Commission has already identified this as a major problem for business. As part of its goal to reduce administrative costs for SMEs by 25 per cent by 2012, the Commission has identified electronic invoicing (e-invoicing) as a major component of its efficiency drive.

A task force looking at the subject reported in July 2007 that “electronic invoicing could significantly reduce supply chain costs by 243 billion EUR across Europe, as well as helping to streamline business processes and help drive innovation.” It also warned against a fragmented approach between different countries that could limit easy communication across national boundaries.

unsuccessful atteMptIn some respects that horse had already bolted, following an unsuccessful attempt in 2004 to promote the use of e-invoicing by harmonising

standards across Europe. “Every member state implemented their own slightly different version of it. It was not prescriptive enough and that made things more complicated.” says Ifor Williams, sales director of Accountis, a major player in the e-invoicing world.

It is also worth mentioning that as recently as 2004, some European countries still actually demanded that invoices should be on paper, although that particular barrier has now been re-moved. Differences still persist, howev-er. For instance, in Germany, electronic invoices are required to have a digital signature, which many commentators see as over-elaborate and a barrier to wider adoption of the technology.

Differing VAT regimes have also been seen as a potential barrier, certainly to cross-border invoicing, according to Stefan Foryszewski, head of business development for OB10, a provider of e-invoicing services. “The invoice is a VAT document, and as such it is subject to all sorts of legislation, which varies across Europe,” he says. “Buyers and suppliers often have concerns over moving to an electronic

The hard road to electronic invoicingThe European economy could save money, time, effort – and a whole load of paper – if it moved to electronic invoicing. ron condon charts progress so far

environment, because they are used to presenting paper documents to the VAT auditors. There is a requirement to retain invoices for six years, so there are concerns over compliance.”

However, he admits that most tax regimes are now becoming more enthusiastic about promoting electronic working and that HMRC has done a particularly good job in enabling it to happen.

Those and other impediments are being ironed out at a pan-European

level by the European Expert Group on e-Invoicing, which will deliver its final report and recommendations in November for implementation early next year.

The group’s chairman, Bo Harald, plays down the importance of standards as a barrier to progress. “The lack of standards is not the show-stopper. We need to change the mindset so that people see these wasteful practices have to disappear,” he says. “We need to get SMEs, and maybe the bankers, to see the

aviva driveS ouT PaPer

From the start of this year, the insurance company Aviva has introduced electronic invoicing for its suppliers, and already has 65 per cent of them enrolled on the system.

Before this project began, Aviva employed a team of 10 full-time staff to process paper invoices and to input the information into the company’s Oracle accounts system. Not only was the process very labour-intensive, but there

was not a reliable audit trail to keep track of the physical invoice. Incoming mail, unless addressed specifically to accounts payable, could often take some days to reach the right department.

Furthermore, Aviva’s suppliers had no way of knowing when they would be paid, or even if their paper invoices had been received.

Around 18 months ago, the company started researching

ways of improving the system, and examined a variety of solutions, including automatic scanning of the incoming invoices.

Finally, it selected the electronic invoicing service from OB10 which operates as a central hub where suppliers can send electronic invoice files in the format of their choice, and which then converts all those files into the correct format required by the buyer organisation.

If suppliers have their own accounting software, they can submit their invoices electronically directly to the OB10 service.

Smaller suppliers can log on to OB10 via the Internet and complete a web-based form to submit their invoices.

Tom Boosey, accounts payable service development manager at Aviva, says the service has already created benefits for both

Aviva and its suppliers. The cost of the overall invoice process, he says, has been halved, and the staff in accounts payable are now able to concentrate of more valuable tasks.

“Beforehand, staff were just manually entering invoices into the system. Now they can focus on building relationships with the suppliers, looking after their accounts and making sure they get paid on time,” he says.

Way to go: e-invoicing is the future

E-MONEY 2010 9

e-Invoicing: Fast. Secure.Guaranteed.Discover how e-Invoicing can improve effi ciency and reduce costs. Call OB10, the global e-Invoicing network, on 0870 656 5214 or visit OB10.com

value of e-invoicing. “It’s not just saving the price of a stamp and envelope. It is more about being able to automate accounting, invoice financing (which is easy to do once you have the invoices in a structured form) and then to connect it to real-time cashflow services.”

He is, however, optimistic and says the trend towards e-invoicing is already being forced by large organisations mandating electronic e-invoices as a condition of trading. He cites two examples from his native Finland – the City of Helsinki and United Paper Mills – which have recently stopped accepting paper invoices.

Huge savingsElsewhere, the Danish Government has taken a lead and already reaped huge savings. Increasingly large corporations are insisting on receiving electronic invoices in a structured format, so that the information they contain can be fed directly into the buyer’s own accounting systems without any further re-keying.

“Paper invoices have no future in Eu-rope and this also includes electronic invoices submitted in Word or PDF be-cause they are not produced in a struc-tured format,” says Bo Harald. “Every day

there are new companies setting a dead-line for stopping paper and unstructured invoices. The only danger is that we’ll get a plethora of different practices.”

To avoid everyone going their own way, the European Expert Group will recommend the Cross Industry Invoice standard developed by the UN committee CEFACT.

“This is a very rich and very good standard that we will start to imple-ment with guidelines this autumn,” Harald says. “It will take a while to be-come the sole standard across Europe, but I hope that it will swiftly become the network standard. So if you have invoic-es coming in from 27 members states, they might originate in their national standard, but arrive in a single format.”

He is convinced that Europe has no choice but to drive out unnecessary administrative tasks and inefficiency in order to stay competitive in the world.

As he says, Europe is forecast to be short of workers over the next decade. “By 2020, there will be 35 million fewer people of working age in Europe and 25 million more pensioners.

If we don’t eliminate administra-tive tasks on a large scale, there will not be a way to finance our welfare systems,” he warns.

If electronic invoicing really does take off in Europe, then the benefits for the European economy could go well beyond the saving of

postage stamps and envelopes. Seen in the wider context of an

improved supply chain, then the greater efficiencies will be a boon to all sectors – both public and private sector, and in all sizes of organisation, from the large to the one-man band.

SMEs especially stand to benefit hugely by being paid on time and being able to predict their income. As the payments body BACS reported in September, more than one million small and medium-sized British businesses are suffering from late payments, and collectively they are owed £30.4 billion. The figure in 2007 was £18.6 billion.

While the average sum owed to individual SMEs at any one time has fallen in the past year from £38,000 in 2008 to £28,000 in 2009, the number of SMEs reporting that they are experiencing payment delays rose by just over 65per cent, up from 684,000 in 2008 to 1,085,000 in 2009.

Reasons for delays included cashflow problems, simply forgetting to pay, and that old chestnut, “the cheque’s in the post.” The problem is also cumulative: companies that are paid late will be unable to pay their own suppliers, so the situation inevitably descends into a damaging cycle. BACS’ research found that 52 per cent of SMEs said that if they were paid late, they would pay their invoices later too.

The vicious cycle has to be broken at the top of the chain, by large organisa-tions taking control of their systems and making sure their immediate suppliers are treated fairly. E-invoicing is a crucial element in making that happen.

The banks also have a vital role to play. Not only is their role pivotal in helping to make e-invoicing available to smaller companies, but also in helping to inte-grate the various elements of the supply chain, possibly from the purchase order through to factoring and payment. But

technology alone is not going to make it happen; attitudes and business proc-esses have to be transformed to support new ways of working.

One man who has given this a great deal of thought is Adrian Done, a pro-fessor at the IESE Business School in Barcelona. He spent many years in the automotive industry working on streamlining supply chains and he is naturally suspicious of new buzzwords – such as e-invoicing – that purport to offer a simple solution to long-standing problems. “E-invoicing can have great benefits if it’s well implemented,” he says, “but technology is never a magic wand, it is just part of the toolbox.”

For him good supply chain manage-ment comes down to one word – team-work – but he sees far too little teamwork happening in business. In July this year, he published the findings of a study he carried out with 550 chief financial of-ficers from around the world.

This revealed that only 46 per cent of CFOs believed their own internal fi-nance and purchasing departments were properly integrated. “What level of inte-gration can organisations hope to have with external companies when their in-ternal integration is so poor and there is so little communication and empathy between the departments?” he asks.

“That is a where a system such as e-invoicing is potentially very powerful – it has the potential to facilitate com-munication between the holders of the

purse-strings in the finance department, the people with supply chain knowledge in the purchasing department and the suppliers in the external supply chain.”

To achieve all that potential, however, the human element – ‘the team’ - has a big role to play in moderating the in-formation that the systems produce. Professor Done says it’s well known in supply chain management that technol-ogy, if unchecked, can trigger sharp re-actions (known as the bullwhip effect), which can result in overstocking or oth-er unwanted results. Another example is computer-driven financial systems that can generate similarly extreme move-ments in markets.

“There are dangers of relying too heavily on technology,” he says. “There are not any automatic systems on this planet that can be switched on and left to run. The human element has to be there. You need judgement and wisdom to moderate the systems.”

As he says, in this globalised world, it is supply chains not companies that compete against each other. “In pretty much any sector, there is a flow of goods, services, information, data and money. It is all about flows upstream and downstream.

To achieve good teamwork, you need good communication. That means the members have to work together and collaborate.” If his research is to be be-lieved, we have some way to go before reaching that level of integration.

The bigger prizeCompanies build their success on efficient supply chains, and e-invoicing has an important role to play in keeping suppliers afloat. But as ron condon discovers, technology can only deliver part of the answer

The paper invoice has no future

10 E-MONEY 2010

For many observers, it seems odd that while electronic pay-ments have become common-place for business of all sizes,

the banks have failed to take a more proactive role in facilitating other as-pects of the trading cycle.

Ifan Williams, sales director of the e-invoicing services company Accountis, speaks for many when he says: “Nearly all payment activity is done electronically, but there has been little progress so far by the banks in being able to handle the other business transaction types as well.”

However, there are small areas of activity and a few banks have begun to spot what could be a highly lucrative business proposition. For instance, Accountis provides the e-invoicing service which RBS now offers to its own customers.

Ian Watkinson, head of product innovation at RBS, says the idea of the e-invoicing service is to make electronic operation feasible even for small companies. Large companies have long used Electronic Data Interchange (EDI) systems to communicate orders, invoices and remittance advices, he says, but those facilities have been beyond the reach of smaller firms.

“Previous attempts to improve elec-tronic document exchange have worked well between a large buyer and a large supplier where there are large volumes, however this hasn’t really worked for smaller organisations,” he says.

The RBS service aims to cater for suppliers of all levels. If they have an accounting system of their own, suppliers can download a small piece of software, which intercepts any invoices they try to print for a buyer. That file is then sent electronically to the RBS system, and formatted ready to be sent on to the buyer’s accounting system.

Small suppliers without accounting software of their own can just log on to the RBS system and complete a web-based form with all the details of the invoice. Then the details go straight to the purchaser’s system.

“We’re not trying to change the way people work. We are faithfully trying to reproduce what happens in paper today, but online,” says Watkinson. “If you are too prescriptive, suppliers just say it’s too hard.”

for suppliers, it’s freeThe aim, he says, is to help big buyers get their invoices into their accounting systems with ease. RBS charges buyers for use of the service based on the number of transactions, but for the suppliers it is free.

By tying in the electronic invoices with the buyers’ own accounting systems, it eliminates the need for any manual re-

keying of information, which can intro-duce errors and inaccuracies. Both sides benefit: buyers can automate the receipt and processing of an invoice, while the suppliers can be sure the invoice has ar-rived and is in the system.

So why have so few banks chosen to get involved?

RBS’s Ian Watkinson says that customers are worried about data security. “Customers are rightly nervous about the reliability and integrity of electronic invoices data, which is why we decided to use digital certificates throughout. They allow you to ensure the authenticity of the data, and we can check that the invoice data has not changed in transit between the supplier and buyer via the internet.”

But Stefan Foryszewski, head of business development for OB10, which works closely with Santander Bank,

says most banks have been slow to spot the potential. “The recent problems in banking have dampened the desire to invest, but I see that changing in the next 18 months,” he says.

“A lot of banks have online portals. It would make sense if that portal could be extended to create or even receive online invoices. The banks have access to millions of SMEs and we have access to a large number of buying organisations. It would be appealing for us to work with the banks. Together we could ease the transition to electronic invoicing.”

Some Scandinavian banks already offer such a service. They have added an invoicing section to their online banking portal, allowing their small business customers to create invoices online and send them off, just as they would make an online payment to another bank account.

RBS is doing something similar that will allow small suppliers to offer and dictate the delivery of e-invoices - effec-tively a trimmed down self service ver-sion of its current e-invoice offering.

“There is a big business opportunity for the banks,” says Ifan Williams. “In these times, they are focusing on their basic transactional services. What they once saw as boring is now seen as a very stable revenue generator.

Williams suggests that the banks could assist in the handling of other documents around the actual payment such as the purchase order and the in-voice. “That would give them additional transactional revenue, and it would also then allow them to do additional things, such as loans – supply finance, invoice factoring.” It seems very low risk too – loaning money to the business based on the assets they are transferring.”

coMplex lanDscapeHe admits that the compliance land-scape in Europe is complex and has muddied the waters somewhat, but points out that progress is being made. For instance, the Euro Banking Associa-tion is currently defining an inter-bank standard to allow electronic invoices to be exchanged between different banks in different countries. By the end of 2009, they will publish what the service should be and next year they will refine the requirement to the point where they can issue a tender for the provi-sion of an inter-bank service.

“Banks are already connected for payments clearing. The proposal now is to connect them for the exchange of electronic invoices,” he says. “It is still early stages but at least the banks are beginning to think about it.”

reverSe facTorinG

One big advantage of streamlining the whole invoice process is that buyers can, if they wish, either guarantee to pay on time, or even negotiate a discount for early payment. That may be very attractive for the small supplier - it saves the buyer money, and it also presents the bank handling the e-invoices with a further opportunity to provide additional financial services, such as reverse factoring.

In this process, the bank undertakes payment of suppliers at an agreed date, but may wait longer to collect the money from the buyer.

This may then allow the buyer to negotiate a discount from the supplier in exchange for earlier payment, with the bank providing the interim

funding, for a fee. All parties can benefit form the arrangement. The suppliers are paid early, albeit at a discount. The buyers pay a credit fee to the bank, but that may be more than offset by the discount they have received. The buyer also benefits by being able to send a payment to one lender rather than many small suppliers.

As well as receiving fee income, the banks are able to develop relationships with small firms without taking on additional risk, because they are in effect lending to the big reliable company rather than to a lot of SMEs. It may also provide cross-selling opportunities and allow the bank to build a credit history on the small firm that may allow additional lending.

Electronic invoicing could provide the banks with some much needed extra revenue. ron condon asks why so few of them have yet to spot the opportunity

a challenge for the banks

“Customers are rightly nervous about the reliability and integrity of electronic invoices data”

Small suppliers can log on to rBS and complete a web-based form with invoice details and this will go straight to the purchaser’s system

© R

ex F

eatu

res

E-MONEY 2010 11

A variety of industry sectors stand to benefit from the opening up of European payment systems that will

accompany them, but implementation has proved far from smooth. A survey of European institutions conducted earlier this year found that around 70 per cent of the organisations questioned believed that national legislation would not be available until the third quarter of 2009, leaving very little time for institutions to become compliant by the beginning of next week, 1st November.

Still, Mark Peters, cash management di-rector at Barclays, believes that Single Euro Payments Area (SEPA) payments could potentially save up to £10 per non-urgent transaction for firms, depending on their size and discounts for bulk trading.

“Firms should be able to save money and improve administration processes

by embracing SEPA as soon as possible says Peters. There is a commitment from Europe to SEPA so it will happen.”

The aim of the scheme, which has been developed by the European Central Bank and European Commission via the European Payments Council (EPC), is to create a single payment market for transactions in Euros.

This will ideally mean consum-ers and business making and receiv-ing non-urgent payments across the SEPA area efficiently and cheaply, as it is done in individual countries at the moment. It should also lead to improved economies of scale and re-duced cost of the payment system as an open market allows financial insti-tutions to compete in countries they have not previously had access to.

The SEPA Credit Transfer (SCT) service went live in January last year for

non-urgent payments, with the aim for a new SEPA direct debit system to be up-and-running by 2010 with a longer term aspiration to replace existing national schemes.

This cycle will be accelerated further by 2010 in accordance with a new piece of legislation coming into force called the Payments Services Directive (PSD).

There are some wider issues surrounding the introduction of the system, including the question of whether it will always be cheaper than using local payment systems, the start up costs of the scheme and the potential dominance of global schemes, particularly with card payments, but the rewards can be considerable.

Peters singled out gaming firms and the third parties they often deal with to handle cash payments in other

countries as being at the forefront of the changing system. “I would say of all the industries, gaming – and the financial services that work with them – is one of the quickest to adapt and implement these types of changes.”

“Many gaming firms work with third parties and they should be dis-cussing this with them. They should also be talking to their banks about the opportunities and challenges.” However, for gambling firms it would seem to offer plenty of posi-tives. “There are two fundamental parts that are going to benefit the gaming industry,” said Mr Peters.

“There is the sending money to customers part, which is being done now and is live, and then from the end

of the year onwards, there is the next development, which will be collecting money through direct debit,” he said.

“With SEPA, if they have a euro account in London, they can make a SEPA payment to those countries within SEPA through their euro ac-count in London without having a local bank account in the country of the beneficiary.

“At the moment it works for paying customers on a non-urgent basis but when the SEPA direct debit system is available it means you will be able to collect money from customers around Europe without the problems or expense of a local bank account in those countries where gambling is allowed.”

euro industries to benefit from payments systemThe introduction of the Single European Payments Area, will ultimately mean that businesses across the EU, will be able to treat euro to euro payments across the continent as if they are domestic, writes andrew Gellatly

SePa is a single payment market for transactions in euros

12 E-MONEY 2010

an enterprise approacH to captureThe benefits brought from automating document intensive business processes cannot be overstated. In the US and Eu-rope alone over 20 million tons of offi ce paper is produced and consumed every year. The use of paper remains pervasive across many industries, resulting in high administrative overhead costs and too many points of failure as documents are routed throughout the organisation.

A recent research report by Aberdeen Group found that 75 per cent of compa-nies surveyed employ predominantly pa-per based processes to manage their ac-counts payables (AP) function, taking as long as 33 days to process an invoice at a cost of £22. Paper based invoice process-ing is labour intensive and subject to multiple points of failure – from the time an invoice is received until it is matched, validated, reconciled and finally paid. Ac-counts payable staff spend 40 per cent of their time researching information to simply respond to basic supplier inquir-ies such as invoice receipt and payment status. AP staff also lack sufficient visibil-ity into their cash management processes and cannot maximise financial advan-tages from early payment discounts.

DocuMent capture Moving to MainstreaM aDoptionWithin these document intensive ap-plications, early adopters of capture tools have been the individual depart-ments most affected by slow and ex-pensive manual paper processes. Fre-quently each front office department would discover the benefits of capture independently, with little cross-de-partmental consideration.

High volume document capture systems have also been found in the back offices where the same docu-ment functions had previously been performed manually. Many of these forms processing operations process incoming paper documents in batches using high volume scanners. In its early days, capture’s role was almost exclusively one of scanning to a man-ually indexed archive.

Unfortunately, centralised capture operations separate data entry from the very business processes they intend to serve. Moreover, when document cap-ture is only used at the end of a process, organisations fail to realise the benefits of integrating data capture with trans-actional business processes. The bene-fits of early capture include eliminating paper as soon as it enters the organisa-tion, reducing points of failure, accel-erating business processes, improving customer service and shifting resources away from tedious labour intensive tasks to higher value activities.

Given the clear benefits, progressive companies around the world are mov-

ing document capture to the beginning of the business process. The accelerated adoption of desktop scanners and mul-tifunction peripheral devices (MFPs) provides an indicator of this changing landscape. There is a shift toward trans-actional capture solutions that enable organisations to directly and reliably integrate capture into their document driven business processes.

Document capture has evolved far beyond its root in scanning to ar-chives. Document capture systems now feed and initiate transactional and time sensitive business processes, enabling document driven business process automation by:• �Transforming� paper� based� docu-

ments into digital images as soon as they enter the organisation;

• �Delivering� outstanding� image� qual-ity for any scanned document;

• �Capturing,�classifying,�extracting�and�validating any document or form, re-gardless of format or type;

• �Automating� the� straight-through�processing of information into work-flows and business systems; and

• �Auditing�the�processing�of�all�docu-ments from point of receipt through to archiving

extenDing tHe value of existing DocuMent capture investMentsBusiness processes rely equally on both front and back office operations. The centralised capture, data crunching, back office operations have proven themselves to be an extremely efficient means of ex-tracting information from high volume structured documents. Likewise, capture deployed by multiple departments in the front office has established its value in improved customer service and process efficiency. Semi-structured documents such as invoices can now be scanned “lo-cally” and the document content reliably and accurately extracted.

The reality of today’s work processes makes this is a hybrid world. Scanning need not be a “here or there,” front or back office operation. The key is to get the two

sides communicating more efficiently. By taking this enterprise approach to cap-ture, organisations can greatly increase the return on their existing investments in both staff and technology. The network infrastructures, which have become an organisation’s communication backbone, are that much more effective when paper based and electronic information can be seamlessly integrated. Document reposi-tories become more than storehouses of archival records when ongoing transac-tions can access and update information in real time. As for investments in person-nel, workers enjoy substantial productiv-ity gains when paper documents do not interrupt work, but are simply a connect-ed part of any business process.

Employees are not only able to focus on higher value tasks, but are also more productive in an environment of real time information sharing. This organi-

sational responsiveness leads in turn to additional benefits. Customer service improves when “waiting for documents” can be eliminated from the corporate mentality. Vendor relations improve when payments are no longer delayed due to missing verifications. Regulatory filings are more timely, payments are received more quickly, and most impor-tantly, businesses can react instantly to a changing environment, which offers a distinct competitive advantage.

tecHnologY anD process in HarMonYEnterprise capture synergy means extending the value of existing tech-nology. For example, simple ad hoc scanning capabilities such as scan-to-email and scan-to-fax features can greatly enhance current investments in office automation tools. When built on a common capture platform, each department’s favoured communica-tion tool—email, fax, MFP or desktop scanner—can be immediately inte-grated without additional investment.

Maximising the potential of an in-tegrated, enterprise wide, document capture platform requires consideration of how well the existing technologies in-teract. As with networking efforts of the past, a highly customised, proprietary infrastructure will be more expensive to implement and difficult to manage. Cross-departmental collaboration can be hampered if the tools don’t play well together. With a standards based plat-form, many of the compatibility issues that plagued earlier collaboration at-tempts can be avoided.

An organisation’s centralised, high volume capture infrastructure must work in tandem with the distributed document capture processes prevalent in individual departments. For all areas to communicate easily, an organisa-tion should have a stable, consistent architecture. A unified infrastructure ensures that both scan-to-archive and scan-to-process capture operations are able to work harmoniously, feeding data into a cohesive business process.

Ideally, the capture platform will provide the scalability needed to meet the full range of document capture demands, from individual desktop and ad hoc workgroup users all the way up to production level volumes. A single provider should be able to offer consistency across all areas. In addi-tion to offering a consistent platform in both the front and back office cap-ture operations, the capture platform should be equally adept at processing the range of documents types coming into transactional business processes.

Rather than designating separate software products for different docu-ment types—structured, semi-struc-tured or unstructured—a single ven-dor that can handle all three provides consistency in user interface, key fea-tures and functions. Further, the sys-tem should be designed to accept both paper documents (scanned) as well as electronic content. With the right solution in place, it shouldn’t matter what form documents arrive in.

PROMOTIONAL FEATURE

The business case for automating document driven business processes

Summary

The Kofax enterprise capture platform offers un-matched scalability from centralised to highly dis-tributed environments, from individual desktops to enterprise deployments and from basic archival scanning to powerful document classification and separation and data extraction. The company’s mar-ket leading technology supports a wide variety of input devices and line of business applications, pro-viding a strong enterprise wide platform on which to standardise document driven processes.

Information enters organisations in a number of ways – paper, fax and electronic – so a comprehen-sive capture system must accommodate documents regardless of their format. When integrating docu-ments into existing business process workflows, a scalable capture platform built on an open architec-ture ensures compatibility between existing hardware devices, relational databases, content management systems and related networking infrastructures.

With a move toward an integrated enterprise ap-proach to document processing, organisations can reap exponential benefits from their capture invest-ments, significantly improving the efficiency of doc-ument-centric operations and reducing costs while improving process quality.

An enterprise capture approach offers the follow-ing tangible benefits:n �Immediate cost savings;n �Reduced redundancies;n �Increased information accuracy;n �Eliminated delays;n �Decreased repetitive manual handling;n �Increased productivity; n �More secure document control;n �Ability to react more quickly to inquiries; andn �Faster, more reliable decision making.

Document intensive business processes are much more efficient in an environment of front and back office symbiosis. An enterprise approach to capture results in lower costs, better document security, increased productivity, improved custom-er relations, simplified regulatory compliance and faster exception processing.

Enterprise capture is a compelling investment that offers a demonstrable ROI that’s relatively easy to calculate.

for more information on how Kofax can streamline and accelerate your document driven processes visit www.kofax.com/solutions

improve your business processes and transactions – better speed, cost, accuracy and efficiency

E-MONEY 2010 13

Cash is a costly and inef-ficient payment method. Some years ago Ovum, the analyst, estimated the

annual cost to banks, retailers and customers of handling, counting, recording, storing and moving it as US$30 billion worldwide. The Boston Consulting Group estimated £4.5 bil-lion per year in the United Kingdom alone. “Cash is out primary target to displace,” says Ian Barber, a spokes-man for Visa Europe.

Electronic cash was originally ex-pected to be carried on plastic chip cards, but a major trial of the Mon-dex system in Swindon failed. How-ever, electronic cash has proved very successful in the form of prepaid cards in transportation systems, using contactless technology that allows the payment to be deducted just by touching a reader.

This technology is now being trialled on the SIM card of mobile

telephones, allowing payments to be made by touching the handset against a reader.

One of the problems of carrying cash on a plastic card is the need to put it into a terminal to dis-play the balance or to top it up with more funds.

However, the telephone already has a screen and a keyboard and can easily and convenient-ly make and receive electronic payments. Payments can even be made between individuals by touching their handset against a contactless card or another contact-less-enabled handset.

evolution not revolution“There is something about the personal nature of the mobile telephone, com-bined with the physicality of touching, which seems to work for consumers,”

says Dave Birch, a di-

rector of Con-sult Hyperion,

an electronic payments consultancy. “In order to get rid of cash, you need to have lots more points of acceptance. We thought we had to gets lots of terminals out into lots of different places. How-ever, we now recognise that the mobile

telephone is the terminal and has

become the device that will actually get

rid of cash.”Safaricom, the leading

mobile communications provider in Kenya, already uses

M-PESA, which exchanges pay-ments by text message. 7.5 million

people use the system, which is sign-ing up 11,000 new customers a day. Barclays, O2, Transport for London and Visa have successfully trialled 500 contactless handsets and an Orange mobile telephone with a built in Bar-clays MasterCard will soon arrive in the shops.

“We are looking at an evolution,” says Barber. “Prepaid is currently sit-ting on a plastic card, but it can sit on a contactless card or a mobile tel-ephone, which is going to be increas-ingly important as the form factor for payment. Various pilots have been

colliding technologies

mobile money... the new service paradigm in banking

rod newing discovers that the mobile phone may provide the missing link in the chain for a cashless society

running for a while to test the tech-nology and it works.”

a secure environMent is keYAnother change on the way it to combine different payment tech-nologies from the same bank onto a single card, including debit, credit and prepaid, which can also be con-tactless. Handsets can also be used to make internet purchases using 3-D Secure for authentication built into its browser.

Handsets can also be used to bring additional security to e-commerce in conjunction with a computer, using the higher level of security associated with encrypted mobile calls. Turkcell, a mobile operator in the Republic of Turkey, has placed a highly secure digital signature appli-cation in SIM cards. As a registered user logs in on the in-ternet through a computer, a secure digitally signed encrypted message pops up on the handset. The pay-ment card PIN can then be entered onto the handset to authenticate the computer purchase in a completely integrated manner.

“Mobile payments are growing incredibly fast all round the world,” says Birch. “Mass transit contactless technology is colliding with mobile telephone technology, with amazing results. We are switching off analogue television, so isn’t it time to think about switching off ‘analogue’ cash?”

The way people think about and use money is chang-ing fast. It is only 20 years since first direct brought

us telephone banking, 10 years since internet banking took off. In 2009, mobile banking is the fastest grow-ing banking channel.

Why is that? Well of course it is enabled by advances in technology. But technology is not the driver. In-deed recent research by the Future Foundation indicates that consum-ers are increasingly content with and trust the technology which banks provide. If it works and is useful, they will adopt it, particular-ly a familiar tech-nology like text and increasingly, smart phone apps.

There is of course a financial di-mension; digital channels – internet and mobile – are lower cost than the telephony which they replace.

However, the core driver is the im-proved product and service proposi-tions for banks and their customers which mobile capability provides. There are two aspects of this. Firstly mobiles have unique properties – they are intensely personal, they are always with you and always on.

That means they are unique in being able to alert you to financial events like hitting a credit limit or as a fraud warn-ing. Clearly an attractive benefit in the present economic climate. This is par-

ticularly so if the alert is ‘smart’, ena-bling the customer to take immediate action to resolving the situation – for example by transferring money from a savings account to avoid an overdraft. Similarly, being alerted that a regular

payment is due and having the ability to authorise or decline it will be another high volume proposition.

But it is the control that mobile banking provides a bank’s customer which gives it the edge. Customers are more satisfied with their bank

the more they feel in control of their money and their interactions with it.

This explains why internet bankers tend to be more satisfied than those who telephone a bank; they trust and value the on screen information, their own decision making as to what action to take and the ability to see the action happen in real time, more than the an-onymity of a call centre. Mobile bank-ers feel in even greater control because of the personal nature of the handset.

The only real constraint on growth is to ensure that the technology is in-credibly simple to use. That means signing up, setting preferences and us-ing in everyday life must be easy. The answer is to provide choice – enabling people to use text, browsers or appli-

cation downloads, whatever the choice of network or handset.

Alastair Lukies, chief executive of-ficer of Monitise, the mobile banking

and payments specialists, commented: “So we can expect to see an increas-ing array of mobile banking and pay-ments products and services coming on stream very quickly. We shall be texting money to friends and family and text shopping in 2010.

“This is in addition to mobile serv-ices we already provide such as bal-ance on demand, transaction updates, bill payments, inter account transfers and sending money abroad”.

Finally, because of their ubiquity, mobile banking is for everyone; it’s very inclusive. The benefits the new services can bring to people without bank accounts both in the UK and in the developing world, in terms of safely making payments and connecting people with their money, are enormous.

Mobile, like all the preced-ing technologies, has been

thought of as a delivery channel. Actually it is a new

way of improving customer service.

PROMOTIONAL FEATURE

Advances in technology have led to new mobile banking services – total control of your finances, 24-hours a day, via your phone

Two become one: the digital wallet

for tomorrow

E-MONEY 2010 15

As the TJ Maxx card data leak clearly illustrates, which affected 130 million cardholders around the

Western world, payment card data can be hacked from the largest organisations with, presumably, excellent levels of security.

But what about businesses setting out in the online mail order world for the first time? How can they hope to protect their card data and stay on the right side of the Data Protection Act and the PCI DSS rules that now affect any business trading online?

Furthermore, the red tape that lurks in the business undergrowth can also come out to bite most firms where it hurts – on their bottom line. Protect-ing e-money data is no easy feat for

businesses of all sizes, but the problem for smaller businesses is usually a lack of staff resources.

Since the end of September, all online businesses must comply with PCI DSS rules on the security of their customer payment card data. Companies must be able to prove that they have met or exceeded the levels of security and best practice procedures that the PCI Security Standards Council imposes.

coMplianceAccording to a senior technology consultant with Sophos, the IT se-curity vendor, a large number of businesses have woken up in recent months to the need to become PCI DSS compliant. Graham Cluley argues that “compliance does not mean safe. There are lots of compa-nies in the news, for all the wrong reasons, who can vouch for this fact.” He emphasises the importance of viewing compliance as a stepping stone in the great security scheme of things and adds that “one can’t view compliance as the be-all and end-all of your data security procedures.”

The process of protecting data – and IT systems in general – from hackers, fraudsters and criminals is a never-ending process.

Whilst most companies have rules on what employees can and can’t do with private data, there is now an overwhelm-ing need to enforce those rules. Sophos have just started offering end point se-

curity as part of our stable of IT security systems and software. Cluley says that as well as protecting against data losses, the software also enforces the security poli-cies in an organization.

It thus seems important to lay the foundations for a better understand-ing of why a particular set of secu-rity systems and policies are in place amongst the workforce.

“If you look at the now infamous HMRC CD-ROM loss incident in which the records of 25 million peo-ple claiming child benefits were lost, you’ll see that, whilst there were se-curity rules in place, those rules were circumvented by staff just trying to do their job,” he said. In hindsight, it seems that the HMRC incident could have been avoided with secu-rity systems in place to stop the staff from using an insecure method of transferring the data to the Scottish office via a courier mail service.

Cluley proffers the argument that if the staff were better educated as

to the reasons why those procedures were in place, there would have been a good chance that someone would have thought about what they were doing and used a more secure car-riage mechanism. “The issue here is that technology is not all-compass-ing. You can’t protect your data us-ing technology on its own, without making life too difficult for the staff to do their jobs,” he said.

Most companies can’t afford to throw money at the problem of e-money data protection, as they are running at full stretch in the current economic recession. This applies doubly to most IT departments in companies who don’t have any extra budget to spend on extra protection. But they need to spend the money, Cluley states, otherwise they’ll be in trouble.

Qexactly what is pci Dss compliance about?

aPCI DSS is a set of guidelines that provide businesses with a best practice framework

to ensure that they are not putting their customers’ card details, or their business at risk. Banks are gradually insisting that all merchants accepting card payments reach a recommended level of compliance to safeguard merchants and consumers against card fraud.

Qwhy are there so many regulations and requirements?

aAlthough recent reports suggest that online card fraud in the UK has declined,

possibly as a direct result of regulation and initiatives such as Verified by Visa, MasterCard SecureCode and PCI DSS, card fraud is still a thriving global industry. Consumers want convenience and as we move into a Web 3.0 era and a mobile boom the need to protect data is ever-more important. Fraud is a moving target and fraudsters will do anything to get card details so the regulations have to constantly evolve to keep up.

QDo most businesses understand or know about compliance?

aUnderstanding the technical aspects of compliance isn’t easy. Sage Pay did some

research with SMEs in April 2009 and 68 per cent of those accepting card payments didn’t know who was responsible for fraud committed on their website. Making it easy to do business is something we’re passionate about at Sage Pay and our focus for the coming months is on security, both educating businesses and supplying the tools that enable them to get on with doing what they do best.

After all, you can’t expect every firm to fully understand compliance issues. That’s not their core business, but it is ours, and that’s why we’re well placed to help.

Qpci Dss isn’t a legal requirement, so why should businesses take it

seriously?

aThere have been some high-profile card data breaches lately where expansive card

data loss was caused. Here you risk a potentially business-de-

stroying fine, as well as your banks refusal to work with you further. There’s also an impact on your brand. Will people trust a brand that doesn’t protect its customer’s data? 72 per cent of those who shop online are already concerned about doing so…

Qwhat advice would you give to e-commerce businesses and those

accepting e-money payments?

aWorking with companies that understand compliance is important, as is looking at

how you handle card payments. For example, if you don’t need to store, transmit or collect card details, then don’t.

Brands such as Faith Shoes and Bombay Duck are taking an intelligent approach to e-payments by outsourcing them to 3rd party specialists whose core business is card secu-rity and PCI DSS.

This enables their customers to shop safely and dramatically reduces the costs associated with becoming compliant, which for some would otherwise cost over £90,000 annually.

My advice is to try to make card security part of your over-all business strategy. Don’t lose potential customers at the check-out because your business doesn’t take card fraud seriously. Treating your customer’s card data securely should be part of building brand loyalty and providing a good customer experience — a key differentiator in the online space. Finally, work with suppliers that understand your business and share your passion for it.

understanding the need for Pci compliance

Know thy enemy and protect e-money data from fraudstersSteve Gold enquires what the real threats facing online businesses are on the e-money and card fraud front

PROMOTIONAL FEATURE

“The red tape can come out to bite most firms where it hurts – on their bottom line”

Protcting data from hackers is a never-ending process

Simon Black, managing director of Sage Pay

Keeping money moving quickly and effectively from your customer through to you is an essential part of running any business, but with the convenience of e-money comes a certain responsibility. We asked Simon Black, managing director of Sage Pay - the UK’s leading payment services provider - about Payment Card Industry Data Security Standards (PCI DSS) compliance

www.sagepay.com

Keep your e-money moving